Now is the time for middle-aged activism

When you’re a teenager you’re angry about everything, without necessarily knowing why. Steven Baxter suggests that it’s time for the grown-up teenagers to get properly angry – the kind of anger that comes with intimate knowledge of everything that’s gone

It's strange how life hands you chances to do things you never thought you'd do again, but there I was on Saturday, on the lower end of an 8ft helium balloon, marching through Manchester to protest about the state of the NHS. Before then, my previous protesting experience, as a punter rather than an observer, came back in the 1990s, before my young mind had even had the chance to be disappointed by New Labour, protesting Michael Howard's Criminal Justice Bill.

Back then, as a callow, long-haired teenager in that awkward space between A-levels and a City and Guilds, protesting seemed like the most natural thing in the world to do. The Government were taking away our Right to Rave, and we were Angry. Angry with a Capital A. We yelled, we chanted, we threw stuff (actually, I didn't; I left Hyde Park "before it all kicked off" to get home early for my dinner, but you know what I mean). We blew whistles. We read the Socialist Worker. We screamed and we bawled. We were young, and we thought it all meant something. Hell, maybe it did.

When you're a teenager you're pretty angry about everything. Politics is just one of the many thousands of things that seem utterly and irrevocably unfair; you gravitate towards it because you might as well find one more thing to complain about. Teenagers are built to rebel against nothing they can define because they simply must; at least, with political activism, it makes more sense, or seemed to at the time.

It might sound like I'm about to dismiss campaigning and protesting as something somehow callow or a phase you have to go through, but I'm not. In fact, I'm beginning to think quite the opposite. The teenagers are right to be angry. I don't know if they know they're right, or if they're just angry and happen to have stumbled on the right mood for our times, but I am more and more convinced of the righteousness of their cause.

The older I get, the more it's beginning to make sense again - the grumpiness, the anger, the disobedience. Maybe now is the time to get back involved, in a kind of middle-aged activism, the kind of anger that comes from knowing just what a miserable, lying professional foul the world is, and how much better it could be.

So there we were, marching through Manchester, a ragtag-and-bobtail collective of trade unionists, activists, protesters and - it irks to say this, but I'm very much afraid it is true - the Usual Suspects. Yes, SW were there. Yes, I got offered a paper. Yes, someone handed me a leaflet about The Death of Trotsky. Yes, there were calls for a General Strike, which will garner the well-meaning movement about as much public sympathy as a slap in the face. Yes yes yes, all of that, but wait: it's easy to dismiss this kind of stuff by looking at the clichés and thinking it represents a simplistic identikit of the aims and objectives of those who dare question the happy neoliberal consensus of austerity first, everything else later. But what if they're right? What if it is worth stopping the NHS from slipping into the meat-grinder? What if there is a better way than cutting everything, privatising everything and outsourcing everything?

It wasn't just us making a noise (thank you, PCS samba band) that chilly Saturday: there were others taking to the streets, for UKUncut to protest Starbucks' buffet tax options, against the Scientology shop in town, and so on. A lot of people are angry. A lot more, you might argue, ignored all the fuss, the noise, the banners and balloons; they carried on sipping their dishwater lattes and filling their heaving plastic bags with Christmas shopping gifts now, playing chicken with the overdraft limit later.

True enough, I suppose. There is apathy everywhere, and maybe only pockets of activism to try and stir the bewildered Christmas shoppers from their numb slumber of melting plastic and payday loan sharks. I don't know if the tide is turning, or if anything will change anytime soon due to getting out on the streets and making a noise about it.

But. oh, I don't know. When we come to look back on this time, when everything relatively decent that we managed to get from the postwar settlement was dismantled and chucked away, do I want to think I didn't do anything about it? Or can I, at least, say that I did something, that I stood up and I said, enough is enough?

Even if it is just a feeble attempt to save what can't be saved, I think you have to try. Probably the teenage me, who took part in that other protest all those decades ago, wouldn't understand, but I do: you have to try. Not because you think you'll win, but because you simply have to try. Because if you don't, the only person you can blame for the way your world turned out is yourself.

Get marching.

 

If you don't try, who will you blame for how the world works out? Photograph: Getty Images
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We're racing towards another private debt crisis - so why did no one see it coming?

The Office for Budget Responsibility failed to foresee the rise in household debt. 

This is a call for a public inquiry on the current situation regarding private debt.

For almost a decade now, since 2007, we have been living a lie. And that lie is preparing to wreak havoc on our economy. If we do not create some kind of impartial forum to discuss what is actually happening, the results might well prove disastrous. 

The lie I am referring to is the idea that the financial crisis of 2008, and subsequent “Great Recession,” were caused by profligate government spending and subsequent public debt. The exact opposite is in fact the case. The crash happened because of dangerously high levels of private debt (a mortgage crisis specifically). And - this is the part we are not supposed to talk about—there is an inverse relation between public and private debt levels.

If the public sector reduces its debt, overall private sector debt goes up. That's what happened in the years leading up to 2008. Now austerity is making it happening again. And if we don't do something about it, the results will, inevitably, be another catastrophe.

The winners and losers of debt

These graphs show the relationship between public and private debt. They are both forecasts from the Office for Budget Responsibility, produced in 2015 and 2017. 

This is what the OBR was projecting what would happen around now back in 2015:

This year the OBR completely changed its forecast. This is how it now projects things are likely to turn out:

First, notice how both diagrams are symmetrical. What happens on top (that part of the economy that is in surplus) precisely mirrors what happens in the bottom (that part of the economy that is in deficit). This is called an “accounting identity.”

As in any ledger sheet, credits and debits have to match. The easiest way to understand this is to imagine there are just two actors, government, and the private sector. If the government borrows £100, and spends it, then the government has a debt of £100. But by spending, it has injected £100 more pounds into the private economy. In other words, -£100 for the government, +£100 for everyone else in the diagram. 

Similarly, if the government taxes someone for £100 , then the government is £100 richer but there’s £100 subtracted from the private economy (+£100 for government, -£100 for everybody else on the diagram).

So what implications does this kind of bookkeeping have for the overall economy? It means that if the government goes into surplus, then everyone else has to go into debt.

We tend to think of money as if it is a bunch of poker chips already lying around, but that’s not how it really works. Money has to be created. And money is created when banks make loans. Either the government borrows money and injects it into the economy, or private citizens borrow money from banks. Those banks don’t take the money from people’s savings or anywhere else, they just make it up. Anyone can write an IOU. But only banks are allowed to issue IOUs that the government will accept in payment for taxes. (In other words, there actually is a magic money tree. But only banks are allowed to use it.)

There are other factors. The UK has a huge trade deficit (blue), and that means the government (yellow) also has to run a deficit (print money, or more accurately, get banks to do it) to inject into the economy to pay for all those Chinese trainers, American iPads, and German cars. The total amount of money can also fluctuate. But the real point here is, the less the government is in debt, the more everyone else must be. Austerity measures will necessarily lead to rising levels of private debt. And this is exactly what has happened.

Now, if this seems to have very little to do with the way politicians talk about such matters, there's a simple reason: most politicians don’t actually know any of this. A recent survey showed 90 per cent of MPs don't even understand where money comes from (they think it's issued by the Royal Mint). In reality, debt is money. If no one owed anyone anything at all there would be no money and the economy would grind to a halt.

But of course debt has to be owed to someone. These charts show who owes what to whom.

The crisis in private debt

Bearing all this in mind, let's look at those diagrams again - keeping our eye particularly on the dark blue that represents household debt. In the first, 2015 version, the OBR duly noted that there was a substantial build-up of household debt in the years leading up to the crash of 2008. This is significant because it was the first time in British history that total household debts were higher than total household savings, and therefore the household sector itself was in deficit territory. (Corporations, at the same time, were raking in enormous profits.) But it also predicted this wouldn't happen again.

True, the OBR observed, austerity and the reduction of government deficits meant private debt levels would have to go up. However, the OBR economists insisted this wouldn't be a problem because the burden would fall not on households but on corporations. Business-friendly Tory policies would, they insisted, inspire a boom in corporate expansion, which would mean frenzied corporate borrowing (that huge red bulge below the line in the first diagram, which was supposed to eventually replace government deficits entirely). Ordinary households would have little or nothing to worry about.

This was total fantasy. No such frenzied boom took place.

In the second diagram, two years later, the OBR is forced to acknowledge this. Corporations are just raking in the profits and sitting on them. The household sector, on the other hand, is a rolling catastrophe. Austerity has meant falling wages, less government spending on social services (or anything else), and higher de facto taxes. This puts the squeeze on household budgets and people are forced to borrow. As a result, not only are households in overall deficit for the second time in British history, the situation is actually worse than it was in the years leading up to 2008.

And remember: it was a mortgage crisis that set off the 2008 crash, which almost destroyed the world economy and plunged millions into penury. Not a crisis in public debt. A crisis in private debt.

An inquiry

In 2015, around the time the original OBR predictions came out, I wrote an essay in the Guardian predicting that austerity and budget-balancing would create a disastrous crisis in private debt. Now it's so clearly, unmistakably, happening that even the OBR cannot deny it.

I believe the time has come for there be a public investigation - a formal public inquiry, in fact - into how this could be allowed to happen. After the 2008 crash, at least the economists in Treasury and the Bank of England could plausibly claim they hadn't completely understood the relation between private debt and financial instability. Now they simply have no excuse.

What on earth is an institution called the “Office for Budget Responsibility” credulously imagining corporate borrowing binges in order to suggest the government will balance the budget to no ill effects? How responsible is that? Even the second chart is extremely odd. Up to 2017, the top and bottom of the diagram are exact mirrors of one another, as they ought to be. However, in the projected future after 2017, the section below the line is much smaller than the section above, apparently seriously understating the amount both of future government, and future private, debt. In other words, the numbers don't add up.

The OBR told the New Statesman ​that it was not aware of any errors in its 2015 forecast for corporate sector net lending, and that the forecast was based on the available data. It said the forecast for business investment has been revised down because of the uncertainty created by Brexit. 

Still, if the “Office of Budget Responsibility” was true to its name, it should be sounding off the alarm bells right about now. So far all we've got is one mention of private debt and a mild warning about the rise of personal debt from the Bank of England, which did not however connect the problem to austerity, and one fairly strong statement from a maverick columnist in the Daily Mail. Otherwise, silence. 

The only plausible explanation is that institutions like the Treasury, OBR, and to a degree as well the Bank of England can't, by definition, warn against the dangers of austerity, however alarming the situation, because they have been set up the way they have in order to justify austerity. It's important to emphasise that most professional economists have never supported Conservative policies in this regard. The policy was adopted because it was convenient to politicians; institutions were set up in order to support it; economists were hired in order to come up with arguments for austerity, rather than to judge whether it would be a good idea. At present, this situation has led us to the brink of disaster.

The last time there was a financial crash, the Queen famously asked: why was no one able to foresee this? We now have the tools. Perhaps the most important task for a public inquiry will be to finally ask: what is the real purpose of the institutions that are supposed to foresee such matters, to what degree have they been politicised, and what would it take to turn them back into institutions that can at least inform us if we're staring into the lights of an oncoming train?